As if the acrimony surrounding M&A after the spectacular fall of private equity in the second half of last year wasn’t enough to swallow heading into 2008, the Wall Street Journal now reports regulators are investigating investment banks’ trading of shares in companies for which they were setting up deals. They report is based on an academic study that found curious trading patterns it associated with M&A activity, the Wall Street Journal reports. The study says some banks likely are trading on their inside information about deals, according to the Journal, which says it is not clear what deals regulators are looking at. The Journal did its own analysis and said it identified dozens of instances in which investment banks appeared to be buying shares in target companies around the same time the banks were advising the acquirers. “The transactions involved most of the major investment banks, including Citigroup Inc., Credit Suisse Group, Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley. The firms either declined to comment or said they found no problems with the trading,” it said.
 
The Journal also reports that Chinese government opposition may scupper Citigroup Inc’s plans to raise capital by selling a $2 billion stake to China Development Bank. The report, quoting a person familiar with the situation, said the problems surfaced over the weekend, but said it was not clear whether the deal had been scuttled. A source at China Development Bank who is familiar with the situation but not directly involved told Reuters that Citigroup and China Development Bank had been in talks towards a possible capital injection from the Beijing-run policy bank but that no deal had yet been agreed. The structure of a potential deal could include an equity investment as well as the purchase of debt.
    
Reuters and Thomson Corp say they expect Thomson’s proposed acquisition of the British group to close early in the second quarter of 2008 after U.S. authorities delayed their decision to synchronize U.S. and European review periods. The U.S. Department of Justice had been expected to give its decision on deal by Tuesday. The European Commission is set to give its ruling by March 10, and it could then take four to six weeks to secure shareholder approval.